Disallowance u/s 40(a)(ia) - assessee in default under section 201 - suomoto disallowance by assessee - Held that:- In the case of Pfizer Ltd. Vs. ITO (2010 (6) TMI 433 - Bombay High Court) the assessee had suomoto disallowed the entire amount of the provision created under sections 40(a)(i)/40(a)(ia), on account of non-deduction of tax. In these circumstances, because the assessee had not claimed any such expenditure in the relevant year, assessee cannot be subjected to the provisions of TDS un .....

RUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM For The Assessee : Ms. Aarti Vissanji For The Department : Shri Akhilendra P. Yadav ORDER PER AMARJIT SINGH, JM: The revenue has filed the appeal against the order dated 20.12.2013 passed by the learned Commissioner of Income Tax (Appeals)13, Mumbai [hereinafter referred to as the learned CIT(A) ] relevant to the A.Y.2009-10. 2. The revenue has taken the following grounds:- i) On the facts and circumstances of the case and in law, the Ld. CIT(A) has er .....

t without appreciating the intent & spirit of section 40(a)(ia) vis-a-vis TDS provisions under chapter XVII of the Act. iii) On the facts and circumstances of the case and in law, the Ld. CIT(A)has erred in not appreciating the facts that disallowance of expenses in computation of taxable income in accordance to provisions of section 40(a)(ia) is temporary, the said expenses are paid to the credit of government. However, TDS provisions provides for collecting tax on income of the deductee. T .....

by the order of learned CIT(A) in deleting the non deducting the of tax by holding that in view of the disallowance u/s.40(a)(ia) of the of the Income Tax Act, 1961 ( in short the Act ), no demand can be raised u/s.201(1) r.w.s 40(a)(ia) vis a vis TDS provisions under chapter XVII of the Act. 4. We have heard the arguments advanced by the learned representative of the parties and have gone through the record carefully. The learned representative of the department has argued that the learned CIT( .....

matter of controversy, it is necessary to advert the operation part of the order of learned CIT(A) in quantum on record. The finding of learned CIT(A) is hereby mentioned below:- 3.7. I have considered the issue and also gone through the case laws cited by the appellant. There is no dispute that the appellant themselves disallowed these expenses u/s.40(a)(ia) of the Act. The AO has not made any further disallowance u/s.40(a)(ia) for these expenses. Further, though appellant has stated that the e .....

o ₹ 28,21,000/- in subsequent year; tax deducted and paid to the credit of Central Government meaning thereby the default has occurred and hence expenses were disallowed in the instant year and were claimed in the year when the taxes were deducted and paid. The appellant s argument is that since they have deducted and paid the exes on the amount of ₹ 28,21,000/- and hence liability to deduct tax at source, and to pay to the credit of Central Government also arose in the subsequent ye .....

reement with appellant on this for the reason that Act fastens the liability at the time of credit or payment whichever is earlier. Here appellant has credited amount of ₹ 28,21,000/- in P.Y. relevant to A.Y.2009-10 and hence deduction of tax subsequently will not absolve them from levy of interest u/s.201(1) and 201(1A) of the Act. Further, for the balance amount of ₹ 56,72,719/- though claimed the appellant have failed to show that entries were not credited in respective parties in .....

ilities were uncertain, estimated and adhoc in nature. However, the decision given in case of Pfizer Limited Vs. ITO (TDS) (ITA No.1667/Mum/2010)(Mum) dated 31st October 2012, which was given in that case for A.Y.2007-08 is in favour. The relevant part of the same is reproduced as under:- It is undisputed that the taxpayer had made provision for expenses which were disallowed under section 40(a)(i)/40(a)(ia) of the Act while filing its income-tax return. As per the journal entries passed, once t .....

ed under section 40(a)(i)/40(a)(ia) on the basis of the Audit Report of the Chartered Accountant, the taxpayer cannot be treated as an assessee in default under section 201(1) of the Act in respect of same amount again. If the revenue s contention was to be accepted, then disallowance under section 40(a)(i)/40(a)(ia) cannot be made and the provisions of section 40(a)(i)/40(a)(ia) to that extent may become otiose. Conclusion: Provisions of TDS are not applicable if the payee is not identifiable. .....

and 201(1A) says as under:- Consequences of failure to deduct or pay- 1) Where any person including principal officer of a company:- a) Who is required to deduct any sum in accordance with the provisions of this Act; or b) Referred to in sub-section (IA) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by r under this Act, then such person, shall without prejudice to any other consequences whic .....

n into account such sum for computing income in such return of income and iii) has paid the tax due on the income declared by him in such return of income and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. 4.1. By going through the said orders it is apparent that the learned CIT(A) has decided the matter of controversy on the basis of order passed by the Jurisdictional High Court in case of CIT Vs. Pfizer Ltd., 330 ITR 62 (Bom.). The findi .....